CO2 emissions and causal relationships in the six largest world emitters

Abstract

This paper aims to analyse and compare the driving forces of the carbon dioxide emissions of the six highest emitters of the world, namely, China, the United States of America, the European Union, India, Russia, and Japan, which are responsible for more than the 67% of the emissions, during the period 1990-2018. The analysis is based on an enlarged Kaya- LMDI decomposition, considering five driving forces and a Granger causality study. Both techniques allow us to disentangle the relationship among the different driving forces and how they change from country to country. The main conclusion from the Kaya-LMDI analysis is that economic growth has been the main driving force that increases CO2 emissions, and to a much lesser extent, the increase in population in most of the six analysed economies. On the other hand, energy intensity is the main factor for decreasing CO2 emissions. Surprisingly enough, the end-use fuel-mix term seldom contributes to the decrease of the emissions, which proves that the use of renewable energy still should be largely promoted. It is worth highlighting the different behaviour observed between the four developed countries and the two most populous developing ones, China and India. The Granger-causality analysis suggests that GDP Granger causes energy intensity in the developed countries; however, GDP and renewable energy consumption Granger cause CO2 emissions only in one case.